Experts: Government rebate incentive will not keep prices down

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By Alois Vinga

ECONOMIC experts say government’s rebate incentive offered to firms to entice them not to hike their prices will not bring any price stability in a volatile economy dominated by mistrust between government and busness.

Announcing a fuel hike a week ago, President Emmerson Mnangagwa said the rebate system offered to manufacturers, mines, transport and the agricultural sector was aimed at averting a resultant hike on goods.

Finance Ministry’s secretary George Guvamatanga also said the arrangement will see players being refunded all the extra costs they would have incurred above the prices they used to charge before fuel price hikes.

In simpler terms, if it cost $2 to manufacture one bar of soap and was now costing $3 to produce the same commodity, then the manufacturer will get a refund of $1.

Authorities hope the arrangement will help keep prices under control.

However, in separate interviews with this week, economic experts said the move was futile in an economy full of bureaucracy and the attendant risk of corruption.

John Roberson described the proposal as an “unworkable idea”.

“Government officials are likely to corrupt the process by producing rebate certificates for their friends,” he said.

“The system will be time consuming and there is no way a business person will be willing to incur costs which will not be recovered in the short term.

“Moreover, the system benefits formal business operators and is not clear on how retailers, schools and hospitals will derive benefit.”

Zimbabwe National Chamber of Commerce past president, Devine Ndhlukula said that despite already biting high fuel prices, it was unfortunate that government continued to take its time before briefing business on the exact plans concerning the refund.

Another expert, Godfrey Kanyenze described the whole initiative as purposeless adding that because of the general mistrust between government and business, the latter will most likely opt for price increases as opposed to waiting for the said government incentive.

“They cannot waste their time spending and expecting to be paid later,” Kanyenze said.

“One other major shortcoming is that businesses can still abuse the system by claiming rebate and increasing prices at the same time because they are hard hit by the currency challenge and would take every opportunity to get more.”